Income tax

Make tax digital for income tax is delayed

QUESTION: I run a small business in my town and keep financial books and records on spreadsheets. I have provided these spreadsheets to my accountant each quarter for him to submit my VAT returns. I read that I will need to keep digital records for my business and submit them quarterly to HMRC. Is it correct?

ANSWER: Making Tax Digital (MTD) for VAT was first introduced in April 2019 and required many businesses to keep digital records and use accounting software to complete their VAT returns.

Currently, most VAT registered businesses with turnover over £ 85,000 comply with BAT legislation and this is expected to be extended to all other VAT registered businesses from April 2022.

MTD for income tax was supposed to be introduced from April 2023, but the government announced last month that this has now been delayed by 12 months until April 2024 for independent businesses and owners, with an additional 12 month period for partnerships until April 2025. MTD for income tax will apply to companies with annual income above £ 10,000.

MTD for income tax is similar to MTD for VAT in that companies will need to keep digital records and use accounting software to send information to HMRC on a quarterly basis, the main difference being that MTD for income tax will send details of income and expense. every quarter, and not just by submitting the figures for the VAT return as is the case in MDT for VAT.

“We recognize that as we emerge from the pandemic, it is essential that everyone have enough time to prepare for the change, which is why we are giving people an extra year to do so. We remain firmly committed to this change. to make taxes digital and to build a tax system suitable for the 21st century, ”said new financial secretary Lucy Frazer.

The announced postponement is the latest in a series of delays and postponements in the MTD program, which was proposed by Chancellor George Osborne in late 2015.

The start date for MTD for small businesses was originally scheduled for April 2018, and then the focus shifted to MTD for VAT. The MTD income tax program was to be delayed until lessons were learned from the deployment of VAT.

Turnover for entry into the MTD income tax scheme remains at just £ 10,000 a year, much to the disappointment of many who were pushing for a much higher entry threshold.

Since the turnover threshold must take into account the taxpayer’s income from all of their sole proprietorships, as well as their rental income, the HMRC must gather several figures from the taxpayer’s self-assessed tax returns. It is only when the total tax returns reach the threshold of £ 10,000 that the HMRC will issue a notice of filing under the MTD regulations.

If MTD Income Tax were mandatory from April 2023, the turnover test should apply to the figures declared in the 2021/22 tax return, submitted before January 31, 2023, and possibly to the declared turnover. in the 2021/22 declaration. These two years were affected by the pandemic which reduced the turnover and rental income of many businesses and owners.

Subsidies from local authorities to companies subject to the professional tariff would also increase turnover during these periods. SEISS grants should not have been included in turnover, but some taxpayers reported them as such, forcing HMRC to make numerous corrections in taxpayer self-assessments for 2020/21, and maybe also for 2021/22.

Since MTD income tax will now begin in April 2024, the base year for testing the MTD revenue threshold will be tax year 2022/23. The revenue figures for this year are not expected to be skewed by Covid-related subsidies and will hopefully reflect normal trade beyond the pandemic for most businesses.

This recent delay is a very welcome announcement for companies to give them more time to prepare for the last MTD installment.

:: Malachy McLernon (m. [email protected]) is administrator of PKF-FPM (www.pkffpm.com). The advice in this column is specific to the facts surrounding the question being asked. Neither the Irish News nor the contributors accept any responsibility for any direct or indirect loss resulting from reliance on responses.


Source link

Leave a Reply

Your email address will not be published. Required fields are marked *